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Aaron Burr Takes Everyone to the Bank

Back in February, we looked at Aaron Burr’s collaboration with Alexander Hamilton to form the Manhattan Company. This privately held entity would take on the task of bringing fresh water to the residents of New York City. It was believed that fouled water was to blame for the devastating outbreaks of yellow fever, which was partially true, especially if you factored in the myriads of mosquitoes that lived there and actually spread the disease. If you want, you can go back and read it for some background.

The need was great, the solution seemed reasonable, and Hamilton (a man often at odds with the ambitious Burr) had given a splendid presentation. Milton Lomask, in the first book of his two-volume biography of Aaron Burr, went so far as to say that “…no member of the committee of six worked harder to make possible Aaron Burr’s upcoming triumph in the New York legislature.”

But Aaron Burr was lying to everyone about the Manhattan Company. Burr cared nothing about water, nor about piping it to residents of New York City (or any other city for the matter), nor about combating yellow fever.

Aaron Burr wanted a bank.

As the first Secretary of the Treasury, Alexander Hamilton had pushed for the first National Bank way back in 1790. It was a very controversial move with no shortage of detractors. But the bank had been approved in early 1791 with a 20-year charter. If you recall, over-speculation in the bank’s stock had led to the first “stock market crash” late that summer.

The banks, however, were still around, and as they were products of Hamiltonian thinking, they were predominantly controlled by Federalists. Both the Bank of New York and the local branch of the Bank of the United States (the lone banks in New York City) were greatly disliked by Republican businessmen, who believed they were discriminated against when it came to lending. And while there seems to be precious little evidence that such exclusions persisted, the perception was clearly there.

Alexander Hamilton opposed the idea of state banks, but not simply because they weren’t a Federalist idea. With his keen financial sense, he realized that local banks would become competitive for clients and, in their zeal for the most business, would dilute credit and resort to suspect lending practices to gain more accounts. This could ultimately lead to a melt-down of the financial system…doesn’t this sound vaguely familiar 210 years later?

Anyways, when the New York legislators saw the final bill, they failed to notice that Burr had removed all language dealing with reparing streets damaged by laying pipes and providing water for fire protection.

The Manhattan Company had become a front company. In place of the removed text, Burr added the proviso “that it shall and may be lawful for the said company to employ all such surplus capital as may belong or accrue to the said company in the purchase of public or other stock or in any other monied transactions of operations.”

Ron Chernow (who’s probably going to demand royalties for as many times as I’ve quoted him, but his biography of Hamilton is that good) writes, “The ‘surplus capital’ loophole would allow Burr to use the Manhattan Company as a bank or any other kind of financial institution.”

And on April 2, 1799, New York Governor John Jay unwittingly signed into law the creation of a bank able to compete with the Bank of the United States.

Aaron Burr had pulled off “the perfect crime”, and had done so in brilliant fashion. He manipulated his brother-in-law’s idea about bad water, used Alexander Hamilton as his mouthpiece, and duped New York’s legislature and governor.

Hamilton, of course, was furious. Calling Burr on his hypocrisy, he said, “I have been present when he has contended against banking systems with earnestness and with the same arguments that Jefferson would use…Yet he has lately by a trick established a bank, a perfect monster in its principles, but a very convenient instrument of profit and influence.”

But anger wasn’t limited to the Federalists alone. The general public was aghast at Burr’s lies and, as he was up for re-election in the Assembly, they shunned him at the ballot box. Even some Republicans, who may have admired his cheek and cunning, disapproved of the subterfuge and deception he perpetrated on them as fellow legislators. And what of Dr. Joseph Browne, Burr’s brother-in-law?…the doctor who desperately wanted to help fight yellow fever? He wrote to Burr, “I expect and hope that enough will be done to satisfy the public and particularly the legislature that the institution is not a speculating job.” He would hope in vain as, by the time the company went public, all pretense to a water company had been dropped completely.

The summer of 1799 would see yellow fever rage through New York, and impure water being given to sick residents.

One Response

Barack Obama presents us with the image of the second coming of
British agent Aaron Burr, the man who tried to destroy the legacy of
our American System of Economics as it was constructed by
Alexander Hamilton. Obama, by his Wall Street, money-printing, bailout policy
is a puppet of the British Empire and Lord Rothchild’s Inter-Alpha System
of bankrupt banks continuing the parasitical Empire’s Monetarist System.
Alexander Hamilton’s American System was based on Credit directed to
building and manufacturing production for a soverign republic dedicated to
the common good. End British Globalizationa and we can restore our American Republic the way Lincoln and F.D.R. did.